When major corporate brands start bashing each other over the head in public, you know that commercial rivalry between them has reached an intense level. This is exactly what’s happening in South Africa’s mobile industry, where Vodacom, MTN and Cell C have taken to sniping at each other at every available opportunity.
The latest attack has been launched by MTN on Cell C. It’s accused its smaller rival of a “serious lack of planning” over its call on the regulator, the Independent Communications Authority of South Africa (Icasa), to postpone this Friday’s reduction in call termination rates so that there can be an urgent review of whether the regulations that govern the rates are proving fully effective.
Termination rates, also known as interconnection rates, are the fees operators charge each other to carry calls between their networks. When the fees are lowered, it allows smaller operators to compete more effectively on price against larger rivals.
Icasa has been cutting the rates on a three-year glide path that will see the wholesale per-minute call rate dropping to 40c/minute from a high a few years ago of R1,25/minute at peak times. At the start of the glide path, smaller operators Cell C and Telkom’s 8ta were also given an “asymmetry” advantage, whereby the two operators pay less to terminate a call on the Vodacom and MTN networks than the other way around. That asymmetry advantage was set at 20% in 2011, fell to 15% in 2012, and will fall to 10% this week when the rates are due to be cut again.
Cell C CEO Alan Knott-Craig, who has set the cat among the pigeons by slashing retail call prices — in the process triggering the current price war — wanted Icasa to postpone this month’s cut in the rates, presumably so he could argue the case for an asymmetry regime that is more favourable than the 10% skew that will take effect on Friday. Cell C met with Icasa last week to press home its case. The authority’s council on Tuesday declined to accede to the operator’s request.
On Monday, MTN tore strips off its rival over its call for a postponement to Friday’s rate cut. Chief corporate service officer Robert Madzonga said that rather than encouraging small operators to become more efficient, asymmetry just increases larger operators’ costs.
“It is deeply disturbing that Cell C, the self-proclaimed South African consumer champion, is now asking Icasa to change the law at the last minute so it can keep its mobile termination rates up when the industry was told they would fall years ago,” he said.
But Madzonga’s comments are a little rich if one considers that for more than a decade both MTN and Vodacom benefited from a highly skewed interconnection regime that allowed the two mobile operators to build their businesses at the expense of Telkom. (If anything, perhaps it’s time for payback as Telkom makes an effort to establish itself as the fourth mobile operator with 8ta.)
On the other hand, it’s rather brazen of Cell C to have asked for a postponement in the rate cut just one week before it was due to come into effect. The rate cuts and asymmetry levels were agreed to years ago. Why not object earlier, Cell C? The operator’s move does appear rushed, perhaps even a little panicked.
Nevertheless, these latest developments illustrate clearly just how intense the rivalry has become in South Africa’s mobile industry — and in a short period of time at that. It makes a wonderful change from the 15-plus years of relatively cosy relations and high prices.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
